Hugh Grosvenor, the new Duke of Westminster, is 25.
Photograph: John Stillwell/PA

Had the Grosvenor estate bequeathed to the new Duke of Westminster been liable for 40% inheritance tax, the amount owed to the Treasury would have been not far off the government’s entire death duty take for the last financial year.

Britain’s generous trust law ensures that the country’s largest fortunes are largely kept intact. This is borne out by statistics which show that duties are a modest source of revenue for the Treasury. HMRC collected total tax of £534bn in 2015-16, of which inheritance tax receipts represented £4.7bn.

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“The benefits of trusts are that they don’t form part of somebody’s estate,” says Ian Dyall, a manager at the financial adviser Towry. “In a discretionary trust, you have a whole pick list of potential beneficiaries which the trustees can choose to appoint benefits to. Because of that, you can’t point a finger to any potential beneficiary and say that’s your money. Money can stay in the trust and cascade down from generation to generation and nobody pays inheritance tax on it.”

Instead of one-off taxation, trusts are subject to charges every 10 years from the anniversary of their creation. Known as the inheritance tax periodic charge, it can amount to 6% of the funds held. There are, however, plenty of loopholes. Agricultural and business property relief applies, and the Grosvenor assets will have been managed to take full advantage of that.

The estate has been divided into three portfolios:

Grosvenor

Eaton Square in central London is the jewel of the 300-year-old Grosvenor estate. Photograph: Jonathan Brady/PA

The privately owned property business has £11.8bn in assets under management. At its heart is the 300-year-old Grosvenor estate in London, which began in 1677 as 500 acres of land including Mayfair and Belgravia. Its holdings range from hi-tech office space in Silicon Valley and a science park in Edinburgh to the freehold on the current US embassy in Grosvenor Square. The jewel is Eaton Square, built close to Buckingham Palace and the Houses of Parliament during the housing boom that followed the Napoleonic wars.

Run as a separate legal entity with its own chief executive, Grosvenor Group paid £58m in tax on profits of £527m in 2015, and has 520 employees on its payroll. Its holdings are largely expected to qualify for relief from the inheritance tax periodic charge.

“Property is at the frontline over what qualifies and what doesn’t,” said Dyall. “If you run a hotel, that’s a business. If you have a rental property and all you do is collect the rent, that’s not a trading company. That’s an investment.”

Wheatsheaf

Set up in 2012, Wheatsheaf employs 450 people and invests in food, energy and water security. It runs Grosvenor Farms, one of the largest farms in the UK with more than 6,000 acres in Cheshire and a herd of 1,400 dairy cows. Other businesses include the UK’s largest bull stud, Cogent Breeding, and a hydroelectric plant on the Reay Forest estate in Scotland.

With its emphasis on food production, job creation and trading rather than land holding, Wheatsheaf assets are also likely to be exempt from the inheritance tax periodic charge.

Family Investment Office

The Family Investment Office manages rural estates in Sutherland, Lancashire, Spain and the family seat at Eaton Hall near Chester. It also takes care of stock market and other financial investments, the charitable Westminster Foundation, and a fine art collection that includes works by Velásquez, Stubbs, Rembrandt and Lucian Freud. The office employs 470 people across its rural estates. It is likely some of its assets, particularly cash investments, will not qualify for periodic tax relief.